ECON 369 - Public Sector Economics

In Class Exercise Ten - Tax Analysis - Part Two (Incidence)

1.  Economists are not only interested in the statutory incidence of a tax, but also its economic incidence?  Why?  Explain the difference.

2.  When economists look at how the incidence of a tax falls on people -- they can analyze the situation in two different ways:  looking at the absolute incidence vs. the differential incidence.  Explain the difference.

            Can you give an example of an economic incidence from a tax (maybe one we haven't talked about)?

3.  Bob makes $50,000 per year and pays $10,000 in income taxes.  Betty makes $80,000 per year and pays $15,000 in income taxes.  Is this tax progressive, regressive or proportional with respect to incidence?  Explain. 

4.  Besides the income incidence of a tax -- what other types of incidence categories do economists look at?   Provide examples.

5.  How might large deficits change the generational incidence of taxation over time?  Is this a bad or good thing?  Explain.

6.  Any other questions over this material?